Inside Shwapno’s Plan To Build A Hyperlocal eCommerce Business: An Interview With Saiful Alam, Business Director, And Ayaz Aziz, Business Manager, E-commerce, ACI Logistics

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May 9, 2018
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Shwapno is one of the most important retail brands in Bangladesh. Over the last couple of years, the chain has experienced a rapid growth. It currently has 64 outlets spanning three cities.

Globally, the business of retail is changing fast. We are seeing the early sign of that change in Dhaka as well. On one hand, many established retails brands in the US and other advanced markets are struggling to cope with the changing world of commerce. On the other hand, once e-retailers like Amazon and Alibaba are moving into physical retail business creating a new dynamics for the industry. Suddenly, Omni-channel has become the keyword in retail space.

Shwapno has been eyeing ecommerce for a while now. In August last year, it finally made its foray into ecommerce with the launch of Shwapno.com. Today, Shwapno aims to build a hyperlocal ecommerce operation using its existing infrastructure.

This is a brilliant strategy, to say the least. Because it allows the company to take advantage of its existing infrastructure, be more efficient and ensure a better customer experience.

The challenge, however, will be integrating its physical retail with its online operation. For an online-retail-first company, such as Amazon, the choice is obvious – everything works as part of its online infrastructure. But For Shwapno, it is not that simple because it is possible to see the integration as a tradeoff as it has invested heavily in physical infrastructure for the last one decade. Solving this puzzle will be its main challenge at this initial stage.

In this wide-ranging interview with Saiful Islam, Business Director, and Ayaz Aziz, Business Manager, E-commerce, of ACI Logistics we cover this and talk about: Mr. Saiful’s journey to what he is doing today, the inception of Shwapno.com, its model, the current state of Shwapno.com, its strategy, challenges, and the ambition going forward, and the future of ecommerce, and so much more.

Mr. Saiful Islam is a Business Director at ACI Logistics. Prior to Joining ACI Logistics, he worked at some of the prominent private sector brands in the country including, British American Tobacco, Nielson, Bata and Dekko Group. Since his joining at Shwapno in 2011, he has played an instrumental role in controlling its accumulated losses, reducing misappropriation of assets and eliminating pilferage, has helped launching Taste, the fast-food joint which currently run in five of Shwapno outlets, has helped grow its commodity business and now oversees the general merchandise line of Shwapno.

Ayaz Aziz is a Business Manager, E-commerce at ACI Logistics. He has played a pivotal role in developing shwapno.com and is responsible for the operation and financial performance of the business.

Enjoy the conversation.

Future Startup

Thank you for agreeing to do this interview. First off, tell us about your background and your journey to what you are doing today.

Saiful Alam

I did my BBA in Finance from the University of Dhaka and an MBA from Institute of Business Administration (IBA) at University of Dhaka. After my post-graduation, I consecutively worked at British American Tobacco and Nielsen, a research organization, for a brief period of time. Then, I joined Bata and stayed there for five and a half years before joining Dekko, a multi-product line company that focuses mainly on ready-made garments.

I joined Shwapno in 2011 as the head of the procurement team and gradually moved to the category department. Around that time, the company tasked me with coming up with new ideas. The fast-food joint, Taste, which we run in five of our Shwapno outlets, was actually one of such initiatives.

I had also helped the organization make up for its accumulated losses, reduce misappropriation of assets and eliminate pilferage. It has been seven years since I joined Shwapno. I have been relentlessly trying to prevent any loss in the organization.

We have a strong internal audit team which is 30-people strong. They have employed various standard operating procedures (SOP) which have made our operation more streamlined. Today, our inventory management system is much better than any time before. Every three months, this team conducts an audit throughout the 64 of our outlets internally to ensure things are moving towards the right direction.

I still hold much of my initial responsibilities. In the category department, I initially looked after only the commodity product line. It saw a huge growth in the last year. The company has now given me the responsibility to oversee the general merchandise line as well.

Online grocery shopping is a relatively new concept in Bangladesh. But seeing its popularity in neighboring countries, we thought it'd be a wise decision to bring it in here. So far, we have been nominally successful. We tested the water with home delivery first and then launched the beta version of our e-commerce site not long ago.

When designing our E-com solution and system we consulted with technical experts from India and elsewhere to get an initial sense of direction. We had Ayaz Aziz and Saadman Khan Nabil who helped us to realize the initiative.

At Shwapno.com, our ambition is to build a hyperlocal ecommerce operation by taking advantage of our existing infrastructure. We are moving deliberately. This is intentional. We want to get it right and don’t want to give a bad impression to our customers by rushing things. We are experimenting every day and exploring new ways of doing things in order to fine-tune our operation and to find the best way of doing a thing.

For payment, we have made the necessary integration. We have integrated SSLcommerz payment gateway. People can pay using cards or bKash. However, digital payment remains a concern for us.

Most of our customers on the e-commerce site, about 75%, pay cash on delivery and the rest make payments digitally. The rate of digital payments is a little higher in our brick-and-mortar outlets but hard cash remains as prevalent mode of payment. There is, I believe, sort of a psychological barrier that makes people not to put trust on anything except cash.

The market is still nascent and the customers are not fully aware of the possibilities of the trade, but we are investing in with a view to get it to a new level. We think we have a particular leverage over other similar players in the space as we already have an existing customer base, brand awareness, and infrastructure. This has made it easy for us to move into the e-commerce space.

At Shwapno.com, our ambition is to build a hyperlocal ecommerce operation by taking advantage of our existing infrastructure. We are moving deliberately. This is intentional. We want to get it right and don’t want to give a bad impression to our customers by rushing things. We are experimenting every day and exploring new ways of doing things in order to fine-tune our operation and to find the best way of doing a thing.

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Future Startup

Could you please give us an overview of your ecommerce operation?

Saiful Alam

We launched a beta version of our platform in August 2017. It has been almost eight months since we started our operation. We currently deliver out of five of Shwapno outlets in Dhaka. This is an experimental operation. We are learning every day and improving.

Shwapno.com model is hyper-local in nature. We are building a hyper-local operation where we plan to serve a certain area from our outlet in that area which we believe will enable us to achieve super efficiency and ensure better customer experience.

We have small teams of four people in each of the five outlets who take care of everything - from the order receiving to delivery - once an order is confirmed. Then there is a small call center here for customer support and a team of 03 people including me who look after the overall operations.

Future Startup

Hyper-local is probably the best model for grocery for many reasons. It improves your efficiency as well as save delivery cost and time. Groceries are perishable items which make time a very important component. Similarly, customers who order online expect fast delivery, particularly when it is a grocery product. A hyperlocal model enables you to do them both. The challenge, however, I think is in integrating your offline operation with your online operation. It has to be seamless if you are to take full advantage of your existing infrastructure. How does your integration work?

Saiful Alam

Although there are many challenges, I believe we are making good progress with integrating our online and offline operations. We are continually working on it and have made good progress.

The leverage we have is our existing infrastructure: 64 outlets in three different cities. It puts us in the best position to serve customers better than anyone. We have already started seeing the advantage of it.

We launched a beta version of our platform in August 2017. It has been almost eight months since we started our operation. We currently deliver out of five of Shwapno outlets in Dhaka. This is an experimental operation. We are learning every day and improving.

Future Startup

Suppose a customer from Banani visits your website and orders a product which is not available at your Banani outlet right at that moment. How do you manage such conjuncture? Because then your hyperlocal model does not give you supposed advantage because of the lack of integration at store level.

Saiful Alam

These are practical challenges. Under such conjunctures, we source products from other outlets. But that, as you mentioned, defeats our hyper-local motive.

In an ideal scenario, our process would be far more efficient and would not require to source from elsewhere. We hope to reach such a level before long.

Future Startup

How big is your team now?

Saiful Alam

Our team is still very small. Instead of headquarters, we call our main branch as the Support Office. It is because the physical outlets are our first layer of customers for us and we provide support to them from here.

The people who work here include Ayaz Aziz, Saadman Khan Nabil, a 5-persons technical team who also manages the customer call center and myself.

There is also an operations team working with each of the five outlets on which we are currently testing our e-commerce site. Once an order is placed, they process it, package it and deliver it to the recipient.

The longest we take to deliver a product is a day. Timely delivery is still a challenge given the condition of the traffic in Dhaka, but we are consistently trying to improve our logistics.

At this moment, we are using third-party logistics partners.

Future Startup

How does your marketing work? How do you reach out to your customers?

Saiful Alam

We take a two-fold approach when it comes to marketing. Instead of spending money only on the advertisement, we also invest in our customers which we believe often yields a better result. Part of our marketing expenses goes into this area. We attempt to build brand awareness by providing direct benefits to our customers, e.g. offering discounts and bonuses.

In terms of pure communication, digital gets priority. Like many other brands, we invest in social media and digital platforms.

Our web platform is also a critical channel for us. That’s where our customers experience us first hand. We plan to improve our website interface and include new options which would attract more customers and ensure an exciting shopping experience.

The leverage we have is our existing infrastructure: 64 outlets in three different cities. It puts us in the best position to serve customers better than anyone. We have already started seeing the advantage of it.

Future Startup

You are a physical retail first company. As we discussed, your outlets offer you a certain advantage that other ecommerce players don’t have. However, at the same time, provided that you have both physical shops and online platform, is it challenging to coordinate the promotional campaigns (e.g. bonus, discounts) because you certainly don’t offer the same discount in your outlets what you are offering online? Does that affect your in-store sales? How do you deal with this kind of challenges?

Ayaz Aziz

This is a challenge, yes. In order to match the promotional campaigns and make the distinction that a campaign is ecommerce only, we try to communicate with the customers as effectively as we can, mainly via SMS.

Previously, we used to convey offer news to everyone, but now we only get in touch with customers who are registered with us on the website. This helps. I do agree, however, that there are challenges and we have a few things to figure out in this regard.

Future Startup

What percentage of your customer is ecommerce only and deliberately shop online regardless of offer? Because you probably also don’t want to cannibalize your offline business.

Ayaz Aziz

I can't share the exact figures but I can tell you that majority of the customers come to us when they get promotional offers. Having said that, we are already seeing a positive conversion trend.

The number of customers we are able to retain is growing every day. These customers are making repeat purchases with similar basket size which is helping us to grow our base. But it is hard to say to what extent we are cannibalizing our outlet business.

Our priority has been and will always be to serve customers beyond our existing base and reach out to new customers instead of selling to the existing Shwapno customers. We can see this happening because of the broader delivery locations, as well as due to the conversions we get from online campaigns targeted to broader audiences.

Future Startup

What do you think about the competition given the fact that there are a couple of grocery players in the market and some of them are already doing pretty well? Although Grocery is an infinitely huge market even if we take into account only the urban populace but on the internet first-mover and largest operator always takes the biggest share of the market?

Ayaz Aziz

As you mentioned, grocery is a huge market and ecommerce is not serving a cent percent of the entire market. The rate of online grocery shopping is still very low in Bangladesh. In fact, the modern trade is less than 2% of the entire market. It means competition eating into your business is a far away thing.

We have some companies here who have been doing fairly well in this space. At Shwapno, we believe that we have the necessary resources to succeed in this market. We also understand our limitation - that we need to strengthen our knowledge base first.

Currently, we are receiving around 350-400 orders per day. The low figure is actually good for us. Due to that, we have been able to focus on improving our operation, packaging, business model, customer experience, and so on. If we were getting 1000 orders per day from the beginning, we don't think we would be able to experiment so much.

Future Startup

What are the major challenges for Shwapno.com now?

Saiful Alam

It might be evident from our discussion so far that logistics is a prevailing challenge for e-commerce businesses. Availability of products is also a challenge.

Given that we already have a business infrastructure; it'd seem an easy job for us to translate our success with the brick-and-mortar to the e-commerce platforms. But we are not making any haste in that regard.

We have a strong brand image in the market. We want to capitalize that but we don’t want to jeopardize it for the sake of fast growth.

Future Startup

What are the plans for the next couple of years?

Saiful Alam

We are going to introduce a mobile app for our online customers very soon. It would be integrated into our main e-commerce platform. We want to go beyond the capital as well.

At present, we provide our online service surrounding five specific outlets in Dhaka. We want to spread that service to other big cities like Chittagong, Sylhet, and Khulna and so on.

Apart from that, we will introduce a few new product lines as a normal course of the expansion. We also plan to invest more in logistics so that we can ensure timely delivery of products.

Most importantly, at Shwapno, we are a customer-focused company. And Shwapno.com holds the same spirit. Our key objective is to provide our customers convenience and a better shopping experience.

I would, in fact, like to point out a policy issue here. You see, VAT is a determining factor when people choose between buying online and buying from the local grocery store. When they purchase grocery items from the latter, they are not required to pay any VAT, but if they buy online or, say, from a super-shop, they have to pay a certain amount of VAT. If we can bring a change to this policy to make e-grocery shopping VAT-exempted, it will surely see a positive impact of it.

Future Startup

What's your take on the overall e-commerce industry in Bangladesh?

Saiful Alam

I would rather talk about grocery specifically. There is a huge potential this business going big. However, we need more awareness in the market. This is why I think more companies should enter the market and build the awareness.

Competition does not matter now. What we need now is the awareness in the market.

Future Startup

How has your experience been since you launched Shwapno.com? What are some of the major lessons?

Saiful Alam

We have learned a lot during the last few months. Now we understand customer behavior better than ever before.

We have also realized that it's not wise to sale only grocery items if you want to open up an online business. You need a well-planned sales mix. People usually turn to the e-commerce platform that provides the most varied range of products.

Don't try to follow anyone. Be yourself. This sounds cliché but it is an underrated trait. We spend a lot of time in trying to fit in whereas we should do the opposite. Choose yourself and be a better version of yourself every day. That should do.

Future Startup

That’s plausible; many successful eCommerce companies in the world are aggregator in nature. From that perspective, it does make sense to venturing into other categories. However, grocery is a difficult problem which demands greater focus; don’t you think your expansion to other categories may dilute your focus?

Saiful Alam

Well, not particularly. We have been running Shwapno for the last decade or so and learned a lot about category management.

We deal with around 30 different product categories at Shwapno and we exercise a good amount of control on all of them. This wealth of experience, I believe, will help us to replicate that success to eCommerce as well.

Future Startup

What advice would you give to young people who are just starting out?

Saiful Alam

Don't try to follow anyone. Be yourself. This sounds cliché but it is an underrated trait. We spend a lot of time in trying to fit in whereas we should do the opposite. Choose yourself and be a better version of yourself every day. That should do.

Venture out to new fields and explore. You find your true self when you explore. Find your passion and pursue it.

Finally, if you want peace and satisfaction in life, try to follow a straight path.

-
Interview by Ruhul Kader, Transcription by Rahatil Ashekan

Cover photo: Ayaz Aziz and Saiful Alam of ACI Logistics (From Left to right)

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